Report: USAID can't manage Afghan aid

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Kabul, Afghanistan • Money is still flowing to Afghan ministries from the U.S. Agency for International Development despite assessments that they can't manage or account for the funding, according to a report from federal inspectors published Thursday.

The Special Inspector General for Afghanistan, which oversees Afghan reconstruction, says the U.S. government has committed more than $1 billion to the Afghan government through direct assistance. SIGAR's report said that while steps have been taken to improve safeguards over the aid agency's funds for Afghanistan, "troubling issues" remain.

USAID countered that it had identified the risks and taken steps to mitigate them, but that SIGAR had not taken that into account because it was not within the scope of the audit. It said SIGAR's audit had not identified any "fraud, waste or abuse" in the direct assistance program.

The report comes at a tricky time for U.S.-Afghan relations, which have been strained by Afghan President Hamid Karzai's refusal to sign a security agreement which would allow some American troops to remain in the country after the end of the NATO-led combat mission.

In its report, SIGAR said that USAID hired auditing firms Ernst & Young and KPMG to assess if 16 Afghan ministries were able to manage and account for funds. The contractors reported back that none of the ministries  from the Ministry of Finance to the Ministry of Public Health and beyond  could do so, and they made hundreds of recommendations on how to mitigate the risks.

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The agency then carried out its own audit of seven ministries, SIGAR said, the results of which jibed with the findings of Ernst & Young and KPMG.

Instead of requiring the ministries to make all or even most of the fixes, USAID waived its own requirements and signed off on direct assistance to those ministries anyways, according to SIGAR.

While SIGAR acknowledged that USAID had taken steps to improve accountability, it said that identifying risks and coming up with ways to mitigate them is "of little use if minimal action is taken to implement them."

It indicated that USAID had only required ministries to implement 24 of 333 recommended "risk mitigation" measures before getting funds.

"USAID's reluctance to make direct assistance to ministries contingent upon them fixing many of the underlying problems identified through the risk reviews does little to support the development of an Afghan government capable of functioning independently and sustaining the programs it manages," SIGAR said.

SIGAR added that USAID's required reports to Congress in 2011 and 2012 on direct assistance were "inaccurate or, at least, incomplete," compromising Congressional oversight of the funds.

USAID did not fully disclose how none of the ministries it had assessed were capable of managing direct assistance funding, or reveal that only a fraction of the recommendations were adopted as conditions to disburse the money, according to SIGAR.

"We believe it was and is incumbent upon USAID to share this information with Congress," the report stated, adding that it had made a series of recommendations to further mitigate risks.

SIGAR said that USAID agreed with the recommendations but had said it had already implemented them. SIGAR said it disagreed.

The watchdog group said USAID had requested that it not publish its findings lest they diminish cooperation from the Afghan government, but it refused the request.

USAID says SIGAR painted an incomplete picture of what steps had been taken to reduce the risk of funding mismanagement.

"SIGAR's audit describes risks which USAID itself identified as a first step in our process of due diligence; but SIGAR chose not to examine in this audit the mitigating measures USAID implemented in response to these identified risks. It's important to note that SIGAR's audit did not identify any fraud, waste or abuse in our direct assistance program," Larry Sampler, Assistant to the Administrator for Afghanistan and Pakistan, said in a statement.

"We do not believe the report then has any basis on which to question whether the identified vulnerabilities have been addressed prior to funds being made available. USAID is and remains committed to aggressively safeguarding U.S. taxpayer resources. We take seriously our responsibilities regarding oversight of U.S. funds," Sampler said.

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